i3 Verticals Sells Payments Business for $440 Million

By Bobby Samwell • Thursday, June 27 15:26 • Permanent Link

i3 Verticals, Inc. ("i3 Verticals") has announced the sale of its merchant of record payments business to Payroc WorldAccess, LLC ("Payroc") in an all-cash transaction for $440 million. This strategic move will allow i3 Verticals to focus entirely on its public sector, education, and healthcare verticals, simplifying its business and strengthening its balance sheet.

Following the divestiture, i3 Verticals will see a significant change in its business composition, with approximately 75% of its revenue coming from software and related services, and 25% from payments and other sources. The sale will also result in the narrowing of the company's customer base to its three strategic verticals.

The proceeds from the transaction, after paying off transaction expenses, will be used to pay down debt. i3 Verticals expects that, after taxes and in the absence of other acquisitions, it will be able to pay down all or nearly all of its 2023 senior secured credit facility. This move will result in a 1% reduction in the company's applicable borrowing rates under the facility until its consolidated total net leverage ratio reaches 2x. Additionally, the borrowing capacity generated from this transaction will provide significant capital for potential future mergers and acquisitions.

The divested business includes two non-core assets from i3's software and services segment related to the non-profit and property management vertical markets, which represented approximately $4 million in annual adjusted EBITDA.

Overall, the sale of the merchant of record payments business is a key strategic moment for i3 Verticals, marking a shift towards a focused vertical market software business and a strengthened financial position. The transaction is subject to closing conditions and is expected to occur in i3 Verticals' fiscal fourth quarter.

This acquisition is seen as an ideal fit for Payroc, aligning with the company's values and goals. Payroc, which processes more than $93 billion in annual transaction volume for over 160,000 merchants, is poised to enhance growth for i3 Verticals' partners and create opportunities for the team members who will join Payroc after the transaction closes.

Following these announcements, the company's shares moved 11.5%, and are now trading at a price of $22.03. For the full picture, make sure to review i3 Verticals's 8-K report.

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